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What affects the cost of health insurance in your country?

Every year, The Economist’s Global Liveability Index assesses the lifestyle qualities of locations around the world by assigning a score taking into account over 30 qualitative and quantitative factors, among which healthcare is one of the most crucial areas. Naturally, we all want to live in a place with efficient healthcare and cost-effective private health insurance solutions. This begs the question, “What is the cost of health insurance around the world?”

Pacific Prime launches a collection of reports and guides every year in the hopes of providing valuable and practical insights to our potential and existing clients. This article, along with our Cost of International Health Insurance Report, provides you with a digestible and comprehensive answer to the above question.

Now in its fourth iteration, this free report, as with previous versions, showcases and analyzes the average cost of International Private Medical Insurance (IPMI) in 100 countries, utilizing figures from seven major global insurers.

In this feature by Pacific Prime, we will take an in-depth look at the main contributing factors shaping health insurance premiums in 2018.

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Compound Annual Growth Rate of the average price of plans from 2015 – 2018

Rank Country CAGR
1 US 3.67%
2 Hong Kong 5.36%
3 Canada 6.95%
4 Dubai N/A
5 China N/A
6 Indonesia 6.70%
7 Mexico 3.07%
8 Israel -1.03%
9 Singapore N/A
10 UK 1.67%
11 Russia -0.35%
12 Argentina 3.47%

The table above indicates the Compound Annual Growth Rate (CAGR) of average premiums from 2015 to 2018 in the top 20 most expensive and 5 least expensive locations for IPMI plans in 2018.

If we rank the table according to the CAGRs of average premiums, Canada (6.95%), Indonesia (6.70%), and Hong Kong (5.36%) are ranked within the top three, while Croatia (-1.49%) and the Dominican Republic (-1.25%) have the largest negative CAGRs.

That said, one thing to stress here is that the numbers above are based on averages only, so a negative CAGR does not necessarily indicate that all insurance plans’ premiums in a specific location have decreased.

Four key drivers behind IPMI premiums

In every annual iteration of our Cost of International Health Insurance report, we identify and summarize the key global drivers of health insurance premiums:

1. Increased demand for international quality private care

As reflected in our 2017 version of the Cost of International Health Insurance report, as well as Deloitte’s 2018 Global health care outlook, we are seeing increased demand for healthcare in both the public and private sectors. This trend is particularly evident in developing countries such as Indonesia, which recorded the second highest CAGR from 2015-2018.

The unprecedented expansion of the global middle and upper class, as well as the aging population not only puts more pressure on the public medical system, but also raises demand for more sophisticated and modern medical equipment and supplies. The increasing popularity of medical tourism also unavoidably drives up healthcare costs and subsequently health insurance premiums.

2. Increased cost of healthcare

We believe that the sole largest driver of international private medical insurance premiums is the increasing cost of healthcare, which has been on the rise for years and has not shown any signs that it will abate any time soon. In fact, when we look at the medical trend reports from different insurers, it seems that the increment rates have risen more sharply every year. For instance, AON’s 2018 Global Medical Trend Rates report shows that the global average medical trend rate in 2018 was 8.4%, up from 8.2% in 2017.

3. Increased regulation

Governments are imposing more regulations on the health insurance industry to better protect the interests of their citizens. Among the various forms of new regulations, we noticed two types that are having a major impact on the cost of health insurance:

Implementation of stricter insurance licensing

Both China and Singapore have raised their barriers to entry in the past half decade or more. For instance, in China, all insurance plans sold must be offered by insurers licensed in China, which means that insurers must inevitably go onshore in order to enter the local market. However, getting an official license is not as easy as one might think. It requires that the insurer holds immense capital, meets compliance requirements, and executes extensive due diligence.

Implementation of mandatory cover

Dubai is the best example when it comes to mandatory cover. The Dubai Health Authority (DHA) has stipulated that all local and foreign residents must be covered by compliant health insurance plans. Anyone in violation of the law are at risk of being denied work visas, or charged with hefty fines. Not only does this mean that all citizens must have insurance coverage, it also means that insurers have to cover all health conditions including the most costly types such as cancer, maternity, diabetes, etc.

4. Continued challenges with fraud regulation

Health insurance fraud has been constantly named as one of the prime drivers of health insurance costs for years, and 2018 is no exception. While the scale of the problem varies depending on the location in question, figures from different organizations estimate that the cost of fraud is astronomical and can total to billions of dollars every year.

Country-specific factors that affect IPMI premiums

Other than the above drivers, we also take a closer look at the two highest ranked countries in the above CAGR table, namely Canada and Indonesia. Even when we just compare the the 2017 and 2018 premium figures, the changes observed is whopping. Canada has jumped from 6th most expensive in 2017 to 3rd in 2018, while Indonesia has jumped from 19th in 2017 to 6th in 2018.

Canada

Despite its mature single-payer healthcare system and free public healthcare, Canada still tops our CAGR ranking. This is because almost all insurers in our reports grouped the country with the US, and applied the same premiums.

Also, Canada spends a lot of money on healthcare. The proportion of healthcare expenditure in Canada is among the highest vis-a-vis all other nations in the Organisation for Economic Co-operation and Development. In our experience, when people spend more on health insurance and healthcare, you will see higher costs of insurance to cover this increased spending.

Last but certainly not least, the single-payer health system in Canada does not cover the cost of medication and prescription drugs. Therefore, Canadian citizens have to rely on private health insurance or pay out of pocket for the cost of drugs.

Indonesia

Indonesia used to be one of Asia’s lower cost nations. However, its middle and upper class population is not only becoming bigger in size, but also getting increasingly affluent and mobile.

The growing affluence drives up the need for better quality and increased access to healthcare, both inside and outside of the country. However, the insufficient number of in-country hospital beds and long wait times at local public hospitals have attributed to the rising cost of healthcare at private hospitals.

The higher mobility means Indonesian residents are more likely to travel abroad. As a result, more and more Indonesian residents are demanding overseas healthcare, which thus leads to increased health insurance costs.

Why have some countries seen a decrease in their average premiums in 2018?

When compiling this report, we noticed that a fair amount of countries recorded a lower average premium in 2018 than in 2017, including China, Israel, Singapore, the UK, and more. There are two major reasons as to why this has occurred:

  • Two insurers decreased premiums

Of the seven insurers studied in this report, Cigna Global and Allianz Partners saw premium decreases in 2018 when compared with 2017’s premiums. We believe that this is largely due to the insurers making internal changes around efficiency and likely better cost containment strategies. Therefore, we deem that such decreases in premiums are not likely to sustain in the long run.

  • Switching to onshore plans for China and Singapore

From this year onwards, we have switched to analyzing onshore plans for China and Singapore, whose premiums are different from those of their global counterparts. It is largely coincidental that the onshore plans are slightly cheaper.

Download the cost of health insurance report now

This feature only touches the surface of why health insurance premiums go up or down in various countries around the world. You can find even more rankings and analysis in our full version of the report.

For a newly updated look at our rankings and Analysis sections (primary global drivers behind the cost of IPMI), you may read our online version here.

If you want to uncover all of our in-depth and comprehensive information, you can download a copy of our full written report in PDF format. This version encompasses a complete ranking of the average cost of medical insurance in 100 countries for different demographics, as well as our full-length analysis (four key drivers behind the five key findings). To learn more about us, do not hesitate to contact Pacific Prime today for a free quote and a plan comparison!